Wednesday, 25 March 2015

Has anyone really looked at house prices and run any decent comparisons?

In the Standard yesterday there was an advert for one/two bedroom flats in Eltham starting at £300,000. On traditional metrics of 3.5 times salary, a couple would have to earn a combined £85,000 a year to afford one.

In most circumstances you would have to say they were well off, yet they could only afford a one-bed in Eltham. Bizarre.

D, I'll save DBC the bother and remind people that high house prices are all down to feminism - give women steady jobs and pay them more and all that happens is that their income is taken into account for mortgage assessments and house prices go up.

Din, it was probably DBC here, it's either that or resale price maintenance. Or how Enoch Powell was right about something or other, Major Douglas welfare proposals or why we should nationalise everything. Or the "JS Mills from here on in" land value tax.

But your point on Ricardo's law stands. Letting agents do the same, their rule of thumb is to divide your income by three and offer you places to rent in that price range.

Yes I've seen that commentary on women/wives salaries somewhere before.

What I find interesting is that it is often claimed the Ricardos rule of Rent does not apply to house prices , but all you have to do is to walk into a high street bank and ask for a mortgage and the loan ofiicer will imediately multiply your salry by the income multiplier. It's right infront of your nose!

There are lots of areas of cities that are not gentrified but they still have high prices due to the close vicinity of economic centers. Such as the City of London.

The reality of the situation aside , there is still room to reflect on the theoretical.

I suspect what the letter illustrates is that people are prepared to pay for the convenience of living in cities, and so location values increase more than wages increase as you go into town. And so people out of town tend to live in houses and people in cities tend to live in flats.Thats the theory anyway. If the details of the process of location value are not familiar to a person the results can look puzzling, hence the writers exclamation of "bizzare".

>MWNot very kind of you to misrepresent my positive views on feminism (I agree with Presidential hopeful, Senator Elizabeth Warren who wrote the subtle, obviously too subtle, "Two Income Trap" on gender issues) or my guarded approval of a very few of Enoch Powell's pronouncements (on wage led inflation - a myth in his view- and American economic imperialism).I do not take the dismissive tone personally ( though it is intended that way) because these are not personal views but those of JS Mill,a founding giant of laissez faire; the American Supreme Court that re-legalised Resale Price Maintenance on a rule of reason basis; CH Douglas whose theory ofNational Dividends (i.e.Citizens Income)recognised what the Bank of England has only just confessed to :that banks createmoney.As these complex ideas are not welcome here for not falling within the very confined theoretical basis of the site, I will no longer bother to present them and sling my hook.

Fact is, you have often pointed out - quite correctly - that two-earner households are digging their own high house price grave, so I thought I'd give you credit for mentioning it in response to Din's now deleted comment.

And then, for a bit of a blogging giggle, I listed your other hobby horses. Did I miss anything important?